Some also see them as providing opportunities to make money in any market environment and as providing diversification.

"With these things, it can be like giving a six-year-old a circular saw," Brad Bennett, enforcement chief of the Financial Industry Regulation Authority, told The Journal. Most small investors "don't understand the risks they're taking."

The fact that hedge funds can now advertise has raised the hackles of some regulators. "Our concern is there's a different atmosphere now," William Galvin, Massachusetts' Secretary of the Commonwealth, told The Journal. "These firms are using more aggressive sales tactics."

One alternative investment that some experts recommend now is emerging markets stocks in the wake of their decline in recent months.

"Nobody's in emerging markets," Michael Gayed, chief investment strategist at money manager Pension Partners, told Newsmax TV. "Yet the law of one price says that because equities have risen so much in the U.S., there's no way that emerging market equities can't then also re-price upward."